IBM ASSIGNMENT

ON
1.GLOBAL DIVISION STRUCTURE, MATRIX AND
NETWORK STRUCTURE.

Divisional Structure

Divisional structures group various organizational functions into product or regional

divisions.

Organizations can be structured in various ways, with each structure determining the manner in which
the organization operates and performs. A divisional organization groups each organizational function
into a division.

Divisional Strategies

Each division within this structure can correspond to either products or geographies of the
organization. Each division contains all the necessary resources and functions within it to
support that particular product line or geography (for example, its own finance, IT, and
marketing departments). Product and geographic divisional structures may be characterized
as follows:

 Product departmentalization : A divisional structure organized by product

departmentalization means that the various activities related to the product or service are under
the authority of one manager. If the division builds luxury sedans or SUVs, for example, the
SUV division will have its own sales, engineering, and marketing departments distinct from
those departments within the luxury sedan division.
 Geographic departmentalization: Geographic departmentalization involves grouping
activities based on geography, such as an Asia/Pacific or Latin American division. Geographic
departmentalization is particularly important if tastes and brand responses differ across regions,
as it allows for flexibility in product offerings and marketing strategies (an approach known as
localization).
 Figure 1: divisional market based structure

Figure 2: divisional geographical structure

Advantages of a Divisional Structure

As with all organizational structure types, the divisional structure offers distinct advantages
and disadvantages. Generally speaking, divisions work best for companies with wide
variance in product offerings or regions of geographic operation. The divisional structure can
be useful because it affords the company greater operational flexibility. In addition, the
failure of one division does not directly threaten the other divisions. In the multidivisional
structure, subsidiaries benefit from the use of the brand and capital of the parent company.
Disadvantages of a Divisional Structure

Some disadvantages of this structure include operational inefficiencies from separating

specialized functions—for example, finance personnel in one division do not communicate
with those in another division. Disadvantages of the multidivisional structure can include
increased accounting and tax implications.

Matrix Structure

The matrix structure is a type of organizational structure in which individuals are grouped via
two operational frames.

Organizations can be structured in various ways, and the structure of an organization

determines how it operates and performs. The matrix structure is a type of organizational
structure in which individuals are grouped by two different operational perspectives
simultaneously; this structure has both advantages and disadvantages but is generally best
employed by companies large enough to justify the increased complexity.

Figure3: matrix structure

Advantages of a Matrix Structure

Proponents of matrix management suggest that this structure allows team members to share
information more readily across task boundaries, countering the “silo” critique of functional
management. Matrix structures also allow for specialization that can both increase depth of
knowledge and assign individuals according to project needs.
Disadvantages of a Matrix Structure

A disadvantage of the matrix structure is the increased complexity in the chain of command
when employees are assigned to both functional and project managers. This increase in
complexity can result in a higher manager-to-worker ratio, which can in turn increase costs or
lead to conflicting employee loyalties. It can also create a gridlock in decision making if a
manager on one end of the matrix disagrees with another manager. Blurred authority in a
matrix structure can result in reduced agility in decision making and conflict resolution.

Matrix structures should generally only be used when the operational complexity of the
organization demands it. A company that operates in various regions with various products
may require interaction between product development teams and geographic marketing
specialists—suggesting a matrix may be applicable. Generally speaking, larger companies
with a need for a great deal of cross-departmental communication benefit most from this
model.

Network Structure

In the network structure, managers coordinate and control relationships with the firm that are
both internal and external

An organization can be structured in various ways that determine how it operates and
performs. The network structure is a newer type of organizational structure often viewed as
less hierarchical (i.e., more flat), more decentralized, and more flexible than other structures.
In this structure, managers coordinate and control relations that are both internal and external
to the firm.

The concept underlying the network structure is the social network—a social structure of
interactions. At the organizational level, social networks can include intra-organizational or
inter-organizational ties representing either formal or informal relationships. At the industry
level, complex networks can include technological and innovation networks that may span
several geographic areas and organizations. From a management perspective, the network
structure is unique among other organizational structures that focus on the internal dynamics
within the firm.

Advantages of a Network Structure

Proponents argue that the network structure is more agile compared to other structures (such
as functional areas, divisions, or even some teams). Communication is less siloed and flows
freely, possibly opening up more opportunities for innovation. Because the network structure
is decentralized, it has fewer tiers in its organizational makeup, a wider span of control, and a
bottom-up flow of decision making and ideas.

Disadvantages of a Network Structure

On the other hand, this more fluid structure can lead to a more complex set of relationships in
the organization. For example, lines of accountability may be less clear, and reliance on
external vendors can be quite high. These potentially unpredictable variables essentially
reduce the core company’s control over its operational success.

2.TRENDS, REASONS AND IMPACT OF CROSS BORDER

MERGERS AND ACQUISITIONS
What is Cross Border Mergers and Acquisitions (M&A)
Cross-border mergers and acquisitions involve assets and operations of firms belonging to two
different countries. Acquisition refer to the purchasing of assets or stocks of part or all of another firm
(or other firms) that result in operational control of the whole or part of the other
firm. Mergers describe the case where two separate firms are combined or amalgamated into a single
business.

Trends in Cross border mergers and acquisition

More and more companies want to go global as they offer great opportunities which are
comparatively cheaper option for companies to build itself internally. Looking at the M&A
sentiments around the world it shows that the businesses acquisition emphasis is changing
from domestic to cross border transactions because of the various benefits it offers.
According to the International Business Report (IBR) two out of five businesses that are
preparing to grow through acquisitions over the next three years are contemplating cross
border opportunities.

1. Merger of LLP into Company (Cross-entity)

National Company law Tribunal, Chennai bench (“Tribunal”) recently

passed a landmark order in the matter of scheme of amalgamation
between M/s. Real Image LLP with M/s. Qube Cinema Technologies
Private Limited which paved a way for merger of LLPs with a private
company. The current provisions for merger in both the Limited
Liability Partnerships (“LLP”) Act, 2008 and the Companies Act, 2013
(“Act”) which are the governing statutes of LLPs and companies
respectively does not permit expressly such cross-entity mergers.
Tribunal stated that “If the intention of Parliament is to permit a
foreign LLP to merge with an Indian company, then it would be wrong
to presume that the Act prohibits a merger of an Indian LLP with an
Indian company.” It further went upon to state “…the legislative intent
behind enacting both the LLP Act, 2008 and the Companies Act, 2013
is to facilitate the ease of doing business and create a desirable
business atmosphere for companies and LLPs.”  to finally conclude that
there does not appear any express legal bar to allow/ sanction merger
of an Indian LLP with an Indian company.

Analysis: The merger order by Tribunal is much welcomed by the

industry as it gives a thumbs-up to cross-entity mergers in cases of
LLPs and companies. Moreover, with no statutory backing, the order
per se could be further challenged at the appellate authority (in this
case National Company Law Appellate Tribunal) and without any clear
provisions there can be problems (tax implications, procedural delays,
etc.) in implementing such schemes.

2. Reverse merger

When a large/healthier company merges into a smaller or weaker

company, it is called a reverse merger. The trend of reverse merger
has been in picture with ICICI (Industrial Credit and Investment Corp
of India) and two of its wholly-owned subsidiaries, ICICI Personal
Financial Services and ICICI Capital Services, reverse-merged with
ICICI Bank in 2002. With Government’s approval of merger between
Vodafone India and Idea Cellular, the concept and structure of reverse
merger has again taken up the limelight in the news. In this case,
Vodafone India will merge with Idea Cellular thus creating country’s
largest mobile phone operator with entity renamed as Vodafone Idea
Ltd. The benefits of going public without raising money, reducing
competition and increasing the market share have been the
determinant grounds of this deal.

Analysis: Reverse mergers are found to be more attractive for

companies intending to go public without the need of raising money.
They can avail the no-IPO way by simply getting reverse merged with
a listed company. Further the losses of weaker company can be carried
forward and will eventually help the entity to pay lower taxes. With
increased competition and disruptive telecom market in the country,
Vodafone Idea merger is expected to start on a frail footing.

3. Matters relating to public interest

The compulsory merger order of 63 Moons Technologies Limited (“63

Moons”) formerly known as Financial Technologies (India) Ltd. & Ors
with National Spot Exchange (“NSEL”) is one of the prominent merger
order in the recent past. Section 396 of Companies Act,
1956 empowers the Central Government to pass necessary orders with
respect to amalgamating two or more companies where it is satisfied
that it is essential in public interest to do so. In this special order, 63
Moons was allowed to merge with NSEL (its fully owned subsidiary) to
provide relief to hundreds of investors who were stuck with an
outstanding amount of more than 5000 Crores. Ministry of corporate
affairs ordered the said merger in the month of February 2016 which
was further upheld by Bombay High Court [1] which went on to
conclude that “…If exchanges such as these are permitted to be
subverted or fail without honouring their obligations and commitments,
the confidence in national economic institutions is bound to suffer and
the repercussion to the national economy will be severe. In such
situations, a negative perception about the business environment of
the country is created, which has grave repercussions on the national
economy. The Central Government, quite conscious of all such factors,
has taken a balanced decision in the facts and circumstances of the
present case”.

Analysis:  Government’s step to merge such entities is much

welcomed as it brings relief to investors by assuring that the holding
company, 63 Moons doesn’t go scot free from the losses faced by its
wholly owned subsidiary. This shows Government’s intervention in
matters relating to public interest and its intention to primarily help
the investors of the said entity. Aggrieved by the same order of
Bombay High court, 63 Moons along with its promoter(s) have
appealed to Supreme Court of India and the matter[2]  is listed in late
September this year.

4. Special Approvals

Insurance Regulatory and Development Authority of India’s

(“IRDAI”) Guidelines for Listed Insurance Companies, 2016 restricts
ownership of listed insurance companies to fifteen percent of the paid-
up capital of entities operating in the financial sector. An exception to
this rule is observed by Life Insurance Corporation (“LIC”) and
Industrial Development Bank of India (IDBI Bank) merger in which LIC
is permitted to take 51% stake in the entity. IRDAI approved the deal
on a condition that LIC will reduce its stake in the coming years.
This approval will infuse capital in debt-laden bank and help both
entities to strengthen financially as well as their subsidiaries which
offer financial products such as housing finance and mutual funds.

Analysis:  Government’s special approval of merger of both these

entities is a deviation from the general rule which listed insurance
companies are expected to follow. However, looking into the wide-
ranging synergy benefits for customers of both these entities, such
merger would help LIC to realise its vision of becoming a financial
conglomerate.

5. Deemed approval for Cross-border mergers

Reserve Bank of India (“RBI”) vide its notification dated March 20th,

2018 provided for the much awaited Foreign Exchange Management
(Cross-Border Merger) Regulations (“Regulations”) with explicit
details with respect to both in-bound and out-bound mergers. Prior to
these Regulations, Section 234 of the Act required that a foreign
company (incorporated under notified jurisdictions) obtain prior
approval from RBI before merging into a company registered under the
Act or vice versa. However, with the introduction of these Regulations,
all merger transactions which are compliant with it shall stand as
‘deemed approved’ by RBI.

Analysis:  These regulations are the first foot steps towards a friendly
regulatory environment in the country with respect to cross-border
mergers. The deemed RBI approval would be much applauded by the
market but somehow the advantage or relief proposed to be given by
it seems to be overshadowed by Regulation 7(2) of the Regulations.
Regulation 7(2) provides that companies involved in the cross-border
merger shall ensure that regulatory actions, if any, prior to merger,
with respect to non-compliance, contravention, violation, or, of the
Foreign Exchange Management Act, 1999 or the rules or regulations
framed thereunder shall be completed, thus, in a way making a
company compliant with rules and regulations by itself (without
intervention of RBI).